With business travellers and tourists shying away from spending heavily on stay in Gujarat, the state is witnessing a shift in demand from luxury hotels to budget hotels lately.
Occupancy rates in luxury hotels across the state has dropped from 65 per cent to 58 per cent in past few months.
On the other hand, the occupancy rates for budget hotels have risen from less than 50 per cent to close to 70 per cent.
"As if the fringe benefit tax (FBT) was not enough a blow, the recent slowdown has forced the companies to cut down travel expenses of their employees and are prefering budget hotels over luxury hotels," said Ashwin Gandhi, director of Express Hotels. Business travel forms 60-65 per cent of the total tourist arrivals in Gujarat.
The impact has been so much that players are now having double thoughts about their plans for luxury hotels.
"In a situation like this where the demand for budget hotels is on the rise at the cost of luxury hotels, we are re-considering our plans as well," said Narendra Somani, chairman and managing director of Ahmedabad-based Bhagwati Banquets & Hotels Ltd.
Industry players feel that the global slowdown alongwith a 10 per cent FBT has led to the shift.